Novartis shares traded at $58.87, up $3.04 or 5.45% in midday trading. Shares had been up more than 7% earlier in the day, as investors responded to the news that Novartis had finally reached a deal to acquire Alcon, the No. 1 company in cataract treatment and a major manufacturer of contact lens solutions and intraocular lenses -- small eye lens implants that correct focusing. Shares of Alcon also advanced on the news, trading at $165.28, up $2.85 or 1.7%.
"The revised offer is considerably higher than what Alcon is worth as a stand-alone entity," said Morningstar equity analyst Debbie Wang in a note to investors. "We think Alcon shareholders are getting a good deal, especially because Novartis shares remain undervalued and hold upside potential."
Morningstar also said that with Novartis announcing Wednesday that it will restart its $10.3 billion share buyback program (which was suspended in April 2008), the Alcon acquisition adds to the value for investors.
"More important, over the long run, we expect the acquisition will give Novartis increased exposure to the quickly growing eye-care business (second only to oncology drug growth over the past five years)," Wang said.